What`s Truth Behind Bailout?; Exploring the Future of Energy; Which Candidate Has the Better Economic Plan?

Aired September 22, 2008 - 19:00:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(BEGIN VIDEOTAPE) GLENN BECK, HOST (voice-over): Tonight, as Congress weighs what they say will be a $700 billion bailout of our financial system, a dire warning from the U.S. Treasury Secretary Paulson. Kind of takes the form of a prayer.

Plus, John McCain and Barack Obama try to make political gains out of the economic losses. This is also going to leave a mark. Your vote has never mattered as much as it does now.

Then, how the stress of our economy is affecting our equally urgent energy crisis. We kick off our special series this week, "Exposed: The End of Oil," a look at the alternatives, because we don`t really have a choice.

All this and more tonight.

(END VIDEOTAPE)

BECK: Hello, America.

I`m as mad as hell because people are not telling me the truth. I like to think that you watch this program because you know that, whether you agree or disagree with me, you know that I`m going to be honest with you. I will say what I mean and mean what I say. I try to live up to that every single day.

As we face a new government rescue, the likes of which we have not seen since the Great Depression, I want to be extraordinarily clear with you on what I think is really going on and who is telling you the truth. When it comes to the bailouts, here`s "The Point" tonight.

I hate this probably as much as you do, but America is like a 747 flying over the open ocean with two engines on fire. The pilot, whether they tell you, "Oh, we`re going for the airport," they`re not going for the airport. He`s no longer even trying to give us a nice, soft landing. He is just trying to stop the plane from dropping out of the sky. Save what you can. But the plane is coming down either way. And here`s how I got there.

Last summer, when I started talking about the credit crisis and mentioning the words, "This could be the Great Depression or worse," I was basically called a Chicken Little nut-job, and that`s OK. You know, I know success in the media is measured in minutes, but success in life is measured in decades. People want sound bites of optimism, and you know what? At that time, I wasn`t offering any. I was trying to get a dose of the truth out.

On the air, guest after guest would predict Dow 20,000. You should invest. Get in the stock market. But as soon as that red light went off on top of the camera, they would say, "Glenn, you`re right on the money. Don`t stop beating this drum."

Well, you know what? I didn`t. And now those guests are just slightly less optimistic. In fact, let me go this far: get the hell out of the stock market. Now when that red light goes off, what I`m hearing the most is frustration that no one`s being honest with you. People are still saying what they need to say to keep their job or to keep their shop open or to get elected. You know what? I don`t have any of those conflicts.

So, America, here is what you need to know tonight.

Last week, our financial system was -- October 1929, it was a heartbeat away from experiencing its own 9/11. But there were no cameras there. There were no live television feeds, no horrifying pictures or stunned news anchors to make it all seem real for us. To most of us, it`s like it never even happened.

But believe me, or at least believe the experts that I`ve been talking to on and off the air, it did happen, and you`re going to feel it soon.

Last Wednesday morning, our treasury secretary turned on his computer and stared into the abyss. There was a complete lock-up of credit and lending, the likes of which this country has never seen before. The result would have brought our entire economy -- not just our financial system, but our entire economy, from the corner store to Wal-Mart -- to its knees. And, gang, I got news for you. It`s still coming.

Our leaders at all levels think that, I don`t know, you`re so weak or you`re so stupid that if you knew the truth, you`d panic. I don`t happen to think so. I think panic is caused by the unknown.

Later tonight, I`m going to tell you what I think is coming our way and what do we do about this bailout. But first, we have to talk about what really happened last week.

Dennis Berman is deputy bureau chief for "The Wall Street Journal`s" money and investing section and author of the column called "The Game," and John Gapper is the associate editor and chief business commentator for the "Financial Times."

Dennis, take me back to Wednesday night. What -- what happened Wednesday afternoon and Wednesday night?

DENNIS BERMAN, DEPUTY BUREAU CHIEF, "THE WALL STREET JOURNAL": Staring into the abyss is probably the best analogy there is. It wasn`t so much that the fundamentals around the world were changing. It was that confidence in the system was rapidly draining from the system.

And so, when that happens, people refused to trade with one another. They refused to lend credit to one another. And the real sort of moving part of this was something called the money-market fund, and people were drawing money from their money-market funds.

And when that happens, all that money gets dispersed to companies around the country and around the world, and that`s the money they use to run their businesses, to employ people, to make payroll. And when that market freezes up, as it was doing on Wednesday, the whole economy comes to a screeching halt.

BECK: OK. Dennis, you wrote just an absolutely fantastic article on this. Let me -- let me go back to the actual Wednesday night. When he was looking at the money markets, when he saw that no one was willing to lend any business any kind of money in America, he knew at that point, Paulson did, we`ve got to do something. We have to meet with the president, and we have to bail all these -- have a massive just change in strategy.

One of his people said, "What happens if they don`t do this?"

And he responded with something that should shake Americans to their core. He said, "If they don`t do this, then heaven help us all," right?

BERMAN: That`s about right. And that`s -- I think you put it very well in your introduction there, Glenn. We don`t really see all the machinations going on. We don`t have visuals. There`s just a bunch of people like us talking about it. But these are real substantive, fundamental things going on in the economy that people need to be aware of.

I think the most important thing that`s going to be the change that comes out of this past week is the following, is that the American way of living, the way we`ve lived our lives, the way we`ve spent our month, is going to change significantly in the years ahead.

We`ve been essentially funding our lifestyle on money borrowed from other parts of the world. Now that money is going to be much tighter, credit is going to be much tighter. So you want to buy a big home, you want to buy a big car, you want to fund a college education, start a business, that money is not going to be there in the way it was. And we`re going to have to change our standard of living.

And people, particularly presidential candidates, probably do not want to say that.

BECK: Right. I`ve been thinking about my grandparents an awful lot this -- and all the things they used to tell me about the Great Depression and how they used to live. That`s really what`s coming.

John, let me -- let me go to you. Last week, to show how bad it was - - first of all, when the market froze up, that means that, if this thing would have collapsed on Wednesday night or Tuesday, they say we were five trades away from a market collapse, people would have been out of a job in many cases today in big companies. Right or wrong?

JOHN GAPPER, ASSOCIATE EDITOR, "FINANCIAL TIMES": I think that`s right. And I think Dennis is right. I think we would have started with -- with people on Wall Street being out of a job. And a lot of people on Wall Street are already out of a job.

BECK: Right.

GAPPER: But it would ripple through the real economy, and there would have been enormously painful effects from it.

BECK: OK. Tell me what it means when people are pouring their money into treasuries, and they`re -- and basically they`re saying, "I don`t want a return on my investment. I`ll take zero interest on this. I just want my money back." What should that tell the average person?

GAPPER: I think what it tells the average person is that the entire system, all the banks, have just lost faith and they`re incredibly nervous that they would just lose their money. So everybody almost at once just said, "As long as I can hold onto my money, that`s good enough for me. Treasuries are good enough for me. I`m just not going to invest in anything else."

BECK: OK. Dennis, the -- there was a report that came out that said Bernanke, who is always very -- these Fed guys are always very measured in what they said. He said -- he met with members of Congress. He said, you`re going to have massive failures within days. Large brand-name companies could go under in the next few days.

Christopher Dodd said it was a sobering meeting as any of us have ever attended in our careers here. People who saw these congressmen leaving the meeting said they were shocked by the pictures of Armageddon that came from Bernanke.

This is -- is this a political game with him? I mean, I heard people say, "Oh, well, what do they -- they`re just saying those things."

Bernanke would never speak in Armageddon-type terms if it really wasn`t.

BERMAN: Well, I wasn`t there in the meeting. I certainly would have liked to have been.

BECK: Yes.

BERMAN: And I think there`s always a certain amount of salesmanship that goes into any massive legislative program, particularly one that has a $7 billion price tag to it. But I don`t think we should have any illusions about, really, what`s happening right now in the economy, and Bernanke is probably correct.

If you look at how people on Wall Street were regarding their peers and counterparties, no one trusted anyone else. And whether we want to believe in Wall Street or not, the trust relationships that go on here in New York help fund and move the capital to real parts of the economy, around the country and around the world.

BECK: OK. Dennis, John, thank you very much for your hard work. We`ll talk to you again.

Coming up, we now understand, you know, how we got ourselves into this financial mess, but where do we go from here? Does it get worse before it gets better? Yes, it does. Search for the solutions in tonight`s "Real Story." Coming up.

(COMMERCIAL BREAK)

BECK: Well, guys, we are in for some dark, dark times. Just ahead, our economy seemingly on the brink of collapse. We have to look at all of the contributing factors that make our financial crisis so serious.

Last week, we concentrated on our overspending as a nation. One of those is energy. We`re going to concentrate on that all this week. Energy, we need as much as we can get.

Oil prices are down compared to the $140 a barrel high in early summer. Demand is down, and did you notice that oil was down under $100 just recently? Cheaper oil is yet another sign that your personal economy is hurting. Oil is cheaper because there`s more of it around, and there`s more of it around because you don`t have the cash to buy it.

However, I noticed earlier today, last I looked, oil was about $116 a barrel.

Here`s the problem. We don`t make things in this country anymore. We make paper. Our economy is about to recess. We are going to need to retool as a nation, start making things again, and that is going to take energy and lots of it. For our first day in our weeklong series, "Exposed: End of Oil," I want to talk about oil`s past, its future, and energy`s future.

T. Boone Pickens is the CEO of BP Capital.

Good to see you again, Boone. How are you?

T. BOONE PICKENS, CEO, BP CAPITAL: Good.

BECK: Good.

PICKENS: And how are you doing?

BECK: I`m very good. The economy here in America, I think, is about to recess, and we`re going to need -- we`re going to need lots and lots of energy, and we`re going to need our energy. You say oil is not the answer. One of the answers is natural gas.

PICKENS: Well, first thing would be leadership. We had people in this country didn`t want to use natural gas for transportation fuel. They wanted to use gasoline and diesel. And so, for years, there are 8.5 million vehicles in the world on natural gas. We have 142,000 of them.

BECK: OK. That doesn`t make any sense. Why -- so we know all of the problems that we have now. Why aren`t we on -- how long would it take us to retool and -- because you can retrofit your engine, you just change your engine, right? It will run on natural gas?

PICKENS: Well, I`m not thinking about your engine. I`m thinking about the trucks. A million trucks on natural gas would cut our diesel usage down by 40 percent. So, it needs to go to the trucks. It goes to your car and my car kind of secondary. Secondary.

BECK: OK.

PICKENS: And so, this all has to happen.

You know, it`s interesting, Glenn. What does the bailout cost, $700 billion?

BECK: Yes. More than that. You know it and I know it.

PICKENS: OK. $700 billion is the number they`re publishing.

BECK: Mm-hmm.

PICKENS: That`s how much oil we buy every year in America. So, $700 billion worth of foreign oil that we get, and you have $70 billion for a bailout of Wall Street. It`s interesting those two numbers are the same.

BECK: So -- but, Boone, why are we not doing -- for instance, just the natural gas? What will it take just to do the natural gas part? That seems a no-brainer, especially with truckers having the problem that they`ve already had and they`re going to have again.

PICKENS: Oh, Glenn, it`s got -- we`ve got to do it. And leadership will take us to where we`re going to go. To date, we`ve had no leadership. So, in this administration coming up, we have to have a promise of these two candidates that we`re going to vote on in November. We have to have them tell us that they have an energy plan.

An energy plan in America has to use natural gas for transportation fuel. It`s the only resource we have that can replace foreign oil.

BECK: You know, Boone, you and I have talked -- we`ve talked about your wind plan before, and I personally am for let`s use everything we`ve got, and that includes wind and solar.

But we`ve also talked about peak oil. And here`s what I don`t understand. You say that we`re at peak oil. And for anybody who -- could you just define that real quick for anybody?

PICKENS: Yes. Well, let me give you this first. The United States peaked on oil in 1970 at 10 million barrels a day. We now produce 5 million. And we`re declining. So, peak oil for the world, I think you`ve peaked at 85 million barrels.

BECK: OK. Now, you say that, but we haven`t been -- we haven`t been aggressively going after the oil that we have offshore, et cetera. We haven`t been going of into Alaska. Russia is shooting capsules down at the bottom of the North Pole to be able to claim all of that.

Brazil, they were known to not have any more oil, and yet they found it just off the shore of Brazil here recently, biggest find offshore that anybody found, if I`m not mistaken.

What`s to say that there -- there is more oil, we`re just not -- we`re just not finding it, we`re not going after it?

PICKENS: Well, Glenn, look at the magnitude of the problem. Eighty- five million barrels will decline at about 7 percent a year. So, to start off with, to get back to 85, you`ve got to add back 5 or 6 million barrels a year. And so, when you mention Tupi in Brazil, that is a big field. That doesn`t come on for ten years. But it`s -- you know, we do have oil in different places.

BECK: Right.

PICKENS: Around the world. When you`re trying to replace 5 or 6 million that`s depleting every year, it`s hard to do. And so, it`s -- I think we`ve peaked, and it`s going to -- it will be a struggle to stay at 85 million barrels a day.

BECK: Can you -- can you put this into perspective? People just think that we`re -- I mean, up on my Web site today, I`ve got these people who are sitting around the stump of a tree crying about the tree: "Oh, the tree." And they`re literally crying. They`re crazy whack jobs.

People just think that we can get out of the energy business entirely, not replace it with really anything. We`ve got the same environmentalists that don`t want to have power lines coming from -- from solar panels or wind panels now.

Could you please put into perspective the energy wars that are going to happen on this planet if we don`t wake up soon?

PICKENS: Well, there`s no question you get back to the same thing again: leadership. Leadership has got to get all these things fixed.

And -- for instance, you`re going to have to have a national grid. Today our grid is so old that if Thomas Edison came back to life and looked at our grid, he would see some of the same things he installed before he died. And so, if our grid is old -- they call it the accidental grid -- we need to replace the grid and we need to proceed.

And I see doing it like Eisenhower did the interstate highways, that he stepped up and said, "This is a crisis; it`s an emergency; and this is what we`re going to do." And everybody got behind him and did it. That`s what you`re going to have to do on the grid. You`re going to have to go to the Eisenhower interstate highway emergency.

BECK: Boone, I have a feeling that we may need some of those federal work projects coming soon. Boone, I appreciate it. Thank you very much.

PICKENS: Thank you, Glenn.

BECK: Coming up, our economic crisis and the race for the White House. Boone`s been talking about the leader. Who is that leader? Whoever gets the nod in November is going to inherit a financial disaster of historic proportions. So, who`s the right man to lead us through these tough times? Either one of these guys? Find out next.

Plus, border violence may not be as high on the presidential campaign radar -- in fact, is it on any of their radar? -- but it is another looming catastrophe that we need to address, and we`ll continue to talk about it. Drug violence, kidnappings, murders. The Mexican mafia is using these uncertain times to their advantage. We have details coming right straight out of prison. You`ll hear them from prison, coming up.

(COMMERCIAL BREAK)

BECK: Well, they say our bailout of our economic disaster is going to cost you, the taxpayer, under a trillion dollars. Make that 2 trillion. It`s funny how the math works in Washington. It`s kind of like -- it`s somehow or another I think they might be using the metric system.

I think it`s fair to say the administration isn`t going to have this mission accomplished by November 4, so that means the next guy is going to inherit one heck of a problem.

Both sides this weekend, they were talking about, you know, their magic formulas. Did anyone hear an answer from either of these clowns? Can somebody put their money where their mouth is? Who is the guy who has the answer to lead us out of this?

Jonas Goldberg is the author of "Liberal Fascism," and he`s the editor, also, for the "National Review" online.

Jonah, did you hear either of these guys say anything worth listening to?

JONAH GOLDBERG, AUTHOR, "LIBERAL FASCISM": No.

BECK: No.

GOLDBERG: Neither of these guys covered themselves with much glory last week or coming into this week. McCain, particularly the beginning of the week, really seemed to be sort of flailing around when he had this golden opportunity to be the grown-up, and instead he actually made Barack Obama look more statesmanlike. At the end of the week, I think that reversed itself a little bit.

BECK: I don`t think -- you know, he keeps saying, you know, I understand the economy. When anybody says over and over and over again, "Hey, I`m a good guy. Hey, trust me. Hey, I get it." Usually I don`t. Usually I think, yes, they`re trying to convince me of that. Is this guy - - boy, wouldn`t you love Romney now? Is this guy listening to anyone of quality, do you think?

GOLDBERG: This guy meaning John McCain?

BECK: Yes.

GOLDBERG: Personally, I`m actually a fan of Phil Gramm`s, and I think Barack Obama should be ashamed of himself if he knows what he`s talking about when he attacks Phil Gramm.

Having Phil Gramm, you know, inside the tent is actually a useful thing for John McCain, but I think his political advice has been terrible. He has -- you know, he leads by double digits on the issue of who`s good in a crisis. And instead, he decided to change the topic back to the economy rather than showing leadership in a crisis.

And when he said the fundamentals of the economy were strong, that might have been dumb politically, but once he said it, he shouldn`t have been knocked back on his heels. Instead, he let Barack Obama sort of talk down the economy even more when he should have gone after Obama and said, "Hey, look, I`m doing the Rooseveltian thing, saying nothing to fear but fear itself."

BECK: He did -- he did come out swinging, I think it was on Friday when he started listening to people -- I mean, you should have had that on day one -- the people that have been advising Barack Obama have been, you know, the head guys at Freddie and Fannie, Lehman Brothers.

GOLDBERG: Right.

BECK: I mean, he`s got some dubious things in his closet here.

GOLDBERG: No. I think that`s right. And I think for people like us who, you know, certainly pre-Sarah Palin were voting anti-Obama much less than pro-McCain, I thing to think about this, who is better capable of saying no to the people with the really bad ideas? And I think John McCain wins that test.

Barack Obama from his roots in ACORN and the community stuff, he has ties to Fannie Mae, his inability to say no to the left wing of the Democratic Party, that makes him a lot scarier to me in terms of handling this than John McCain, who may be not the best on a lot of these issues. But corruption really does disgust John McCain.

BECK: OK.

GOLDBERG: And he knows how to yell at the bureaucracy in a way that I don`t think Barack Obama does.

BECK: Yes, all right. Jonah, thanks a lot.

If you think our economy has finally hit rock bottom, and I know that`s what some people on television are telling me, and maybe they`re right, I don`t think so. Find out what`s coming next in tonight`s "Real Story."

(COMMERCIAL BREAK)

BECK: Well, welcome to the "REAL STORY."

I told you at the top of the program today that our country is in real trouble, it`s like a plane flying around with half of its engines on fire and you can`t put them out. No matter which way you slice it, we are in for a hard landing. Our pilot`s job now is just keep that plane from falling out of the sky and killing everybody on board.

To put it in another way, we are in the middle of an all-out financial emergency, and emergencies have a way of really testing people. In normal times, under normal circumstances, if you tune in to me, you know me as somebody who would tell the federal government exactly where to take their bailout plan and shove it right up their you know what.

But these are anything but normal times. I thought about it an awful lot this weekend, and while it takes everything in me to say this, I think the bailout is the right thing do.

The "REAL STORY" is the $700 billion that you`re hearing about now is not only, I believe, necessary, it is also not nearly enough, and all of the weasels in Washington know it.

You think about this crisis again like an airplane, ok. We could have stopped this whole thing when the plane was sitting at the gate and we were saying don`t load this thing up with easy money and make mansions for anybody who wants them. You can`t take off in this plane. It`s unsafe.

Nobody listened.

You could have turned it around when the plane was taxiing down the runway and we were still screaming, don`t take off. We could have even turned it around just after takeoff. Now the plane, however, is over open ocean, has engine trouble. Who would have seen this one coming?

Well, now we`re stuck in a position where we let that plane fall out of the sky or we do our best to try to have some sort of a controlled crash landing that saves lives and let us salvage what we can. I mean, there are 350 million people on this plane.

The truth is that while $700 billion is an awful lot of money, it is not nearly enough to purchase all the bad assets out there, because they`re already after it.

The Treasury Secretary Hank Paulson knows this. So does Fed Chairman Ben Bernanke. So does the president. So does Chris Dodd, Barney Frank, Obama, McCain -- all of them. They all know.

When you start to realize that the term "bad assets" is soon going to apply from everything for credit card balances to your home equity loan to your car loan, you name it, it`s going to add up. The real bailout number is probably going to be about three times higher, probably going to be at least $2 trillion or more.

I have said this to you over and over again. You`ve got to prepare. I am not a financial adviser. I`m a dope. I`m a rodeo clown. I`m a recovering alcoholic who spends way too much, saves way too little. I`m just trying to get by, just like you are, on the little bit of knowledge that I have.

I am not trying to offer financial advice to anybody. I am trying to offer a dose of sanity and reality in a world that seems to have lost both.

We are not in the ninth inning of this game. You know it and I know it. You feel it here in your gut. We are in the second inning.

The price for our years of greed and burying our heads in the sand while these companies and our government just loaded this plane up cannot be paid for by writing another check or passing a few new federal regulations. It`s going to be much more painful than that. It has to be. That plane is going to come out of the sky one way or another.

The taxpayers may have to pay the bill for this, but believe you me, the people who have done this to us, they better damn well be held accountable, and they will pay, as well. Otherwise, these things will increase in value. I have been warning you and asking you, please, spread the word about all of this since last year.

But I`ve turned the page. While I am sorry that gloomy Glenn is back, I need to tell you what all of the people with agendas or, you know, brokerage house or constituencies, they can`t or won`t tell you -- a hard landing is now the best scenario we can hope for. Just don`t kill everybody on the way down. The worst-case scenario is just that.

In the words of our immortal Treasury Secretary just last Wednesday night, quote, "Heaven help us all."

Nouriel Roubini is a professor of economics at School of Business and New York University and chairman of rgemonitor.com. Peter Schiff is the president of Euro Pacific Capital and author of "Crash Proof: How to Profit off the Coming Economic Collapse." And Brett Arends he is personal finance columnist for "The Wall Street Journal."

To try to help make sense of all of this Peter, let me start with you.

The bailout -- I see this as just stopping the plane from falling out of the sky. Is this naive of me?

You know, they`re going to crash this plane even faster. You know, the bailout is actually going to make it worse because we don`t have the $2 trillion. We`re just going to print it up.

Instead of just the entire economy coming down, we`re going to take our currency and we`re going to have a much bigger crisis when our money isn`t worth anything and interest rates are double digits because nobody will lend us any more.

BECK: All right, that`s what I thought going into the weekend, and then reading more and more and seeing how Nouriel, were we not in 1929 just this last week, we were on the verge of a total meltdown in our economy. And most people don`t even realize that.

NOURIEL ROUBINI, CHAIRMAN, RGEMONITOR.COM: That`s absolutely right. By Wednesday, it looked like the entire financial system was going to implode. That`s why, even if this is a very, very expansive bailout plan, they had to do something new and different because it is dark step-by-step approach for leading up to disaster. So we avoided that beast just by an upsilon.

BECK: Ok. So, how do you answer Peter`s problem? Because Peter is saying we`re going to trash the rest of the country. We`re going to trash anything that`s good by throwing these debts on top of our country -- on our currency. How do you answer that?

ROUBINI: There`s a significant risk, and the problem is also the way they privatized the profits and the gains, and now we are socializing the costs of these massive amounts of greed and risk taking. That`s a problem.

But we have to ask yourself, if you have a collapse on Wall Street, you have destroyed also Main Street. And if you want to save Main Street and not to have a severe protracted recession like Japan for a decade, we have to do something with the borrowers and the lenders and the economy and the financial system operates --

SCHIFF: But the government`s --

ROUBINI: It`s a disaster.

SCHIFF: The government`s not going to save us. They did this to us. They`re the ones that created the greed by eliminating all the risks of mortgage lending in the first place. They say we have to do this, they say we have to go into Iraq because they had weapons of mass destruction. They were wrong.

This plan is a weapon of mass destruction to destroy our economy and to destroy our currency.

BECK: Right.

SCHIFF: As bad as this collapse would be, this is going to make it worse. Doing something different would be shrinking government.

BECK: Brett, I read a story about Ben Bernanke, and he said, you know, he`s a scholar on the Great Depression, and he says the one thing I don`t want to do is what they did right before the Great Depression, which was tighten everything else up.

But I thought to myself, well, that doesn`t mean the opposite is right. You know, that doesn`t make that less wrong. What should they be doing, Brett?

BRETT ARENDS, WALL STREET JOURNAL COLUMNIST: Well, you know, when you compare this to 1929, it`s not just what happened in the stock market. There`s no coincidence. We also just passed another milestone just like 1929 in that our private -- our household debt surpassed our GDP.

Our debt levels as a percentage of GDP are at about, or higher than they were in 1929, and that`s really where all of this has started. Now, I think the Fed bailout is absolutely necessary. I think that the alternative is a disaster. But I hope -- I hope, that this is going to be a wake-up call for all of America.

BECK: That`s not going to be.

ARENDS: People have got to prepare. People watching this at home have got to realize that they have got to adapt to this situation. What`s going to happen in the next five to ten years is going to be quite different and much tougher than in the last five to ten years.

And you need to control the things that you can control. People have got to cut their spending. They`ve got to start rebuilding their balance sheets, getting --

SCHIFF: But how are they going to do that? The government is just borrowing and spending more money. They`re not letting the market fix the problem. And how are we going to get out of this mess with more government, with more inflation?

ARENDS: Listen, listen. The reality -- we can talk about this, but when you have a run on the bank, you have a run on the bank, the government has to step in. The government`s -- in 1928 --

SCHIFF: By destroying our money? What good is it if --

BECK: Wait a minute. Wait a minute.

ARENDS: Listen. You`re complaining accurately about the problems that got us here. The problem is this -- you know, everyone can talk about macroeconomics stuff. I want to talk about what ordinary Americans can do to prepare themselves and sort of try and crash proof themselves in this situation.

But let`s just look at the situation. In 1929, the private sector tried to stop the run on the stock market and couldn`t as it had succeeded in doing in 1907. Not to go too much into history.

But the reality is when you have a run on the bank, when people think, oh, not my stocks are going to fall in value, but my stocks won`t be there tomorrow because my brokerage is going to go bankrupt --

BECK: Right.

ARENDS: -- someone has to do a Jimmy Stewart, stand up on the table and say I can hand out mine. Hopefully, they won`t have to hand all out all those dollar, but without someone saying I`m willing to do so, the whole thing ends.

BECK: Nouriel, let me go to you, because my idea of these bailout is not that it`s going to work. I mean I don`t think that this bailout is going to stop everything. I think there`s massive collapse of other institutions. We were on the verge of losing corporate -- gigantic corporations last week, as well.

There`s more coming around the corner. I think it is to control the crash it is going to crash if you do it or if you don`t do it. One way, it`s guaranteed to crash and be awful and really ugly and bloody. The other way, it`s going to crash, but we might have a little less blood. Do you agree with that or not?

ROUBINI: Yes, I do agree with you. At this point, the recession train has left the station. We are in a recession because consumption HAS been falling for four months in a row. At this point, the banking crisis and the financial crisis train has left the station.

There is going to be a banking financial crisis. We`re going to have a hard landing and a crash.

BECK: Yes.

ROUBINI: As is the difference between a controlled crash or a total collapse, and these this bailout plan, if implemented properly, is going to us lead us to a controlled crash.

BECK: Ok, guys.

That is the "Real Story" tonight. Back in a minute.

(COMMERCIAL BREAK)

BECK: If you watch this program, you already know that most of the violence along our southern border is due to the fact that Mexico is infested with paramilitary gangs run by the drug cartels.

The reality is that Mexican gangs within the United States are also rising in power. I`m full of good news today, aren`t they? Making the crime and the violence in movies like "Goodfellas" seem mild by a comparison. It is nearly impossible to break into the Mexican mob ranks, but one U.S. journalist has gotten a ton of terrifying insider information.

That man is Chris Blatchford. He has a new book out -- he has new book called "The Black Hand -- The bloody rise and redemption of Rene Boxer Enriquez, a Mexican mob killer."

And joining us from prison by phone is Rene Enriquez, the mob leader turned informant.

Chris, let me start with you. Tell me a little bit about this gang.

CHRIS BLATCHFORD, AUTHOR, "THE BLACK HAND": Well, the Mexican Mafia started as a prison gang back in 1957 by a bunch of young guys who were really just trying to control the prison yard at Paulson and San Quentin.

And as they got out of prison 10, 20, 30 years later, it became -- it reached into the streets, ran heroin operations. And then in the `90s, a new group of young guys who were made by the older fellows who started it all, Rene Enriquez being one of them I had this idea that if we organized all the street gang members, all the Latino street gang members in southern California, which at that time were an estimated 60,000 soldiers, you know, we could have a massive drug dealing operation. We could control what all these people could do and really, they could control as Rene says, the whole world, which was a pie in the sky criminal dream, but nevertheless, something that ran through the minds of the Mexican Mafia and their leaders.

BECK: Ok. So, Rene is now joining us by phone in prison. Here is actually some video of Rene helping the United States out. Watch this.

(BEGIN VIDEO CLIP)

RENE ENRIQUEZ, FORMER MEMBER OF "THE BLACK HAND": We all study American sign-language in the Mexican Mafia. Most individuals understand some form of sign language. You have money, drugs, dead, hit -- there are a multitude -- black -- there are just a multitude of signs that we`ve learned and utilized in the visiting room in order to circumvent the audio recorder.

(END VIDEO CLIP)

BECK: Rene, I can`t believe that I can talk to Compean and I cannot talk to Compean and Ramos but I can talk to you on the phone. Why did you turn?

ENRIQUEZ: You know, if you ask me that question on ten different days I`ll give you ten different answers, I think it boils down to a really mob fatigue. I had come to a point where I reached I guess a fatigue in my life with this betrayal in the senior organization.

For the first year I got in, I understood it was not for me, this wasn`t the pie in the sky, silk suit, limousine, and having Mexican Mafia that I thought it was. This is really an organization of individuals with every form of personality disorder. It just took me quite a while to bring myself to drop out of the organization.

BECK: In the while that it took you to drop out of the organization, what kinds of things were you involved in?

ENRIQUEZ: Oh, everything, basically. I mean --

BECK: Did you kill people?

ENRIQUEZ: With all due respect, I believe that the book covers that. Any spontaneous admissions might be prosecutable. So, I`d like to refrain from making a specified admission.

BECK: Ok.

ENRIQUEZ: But I am convicted for two murders. I`ll readily admit that.

BECK: Ok. Chris, you see these gangs now are a terrorist threat to us.

BLATCHFORD: Yes. I think a lot of people who really work closely with gangs in southern California, the guys on the inside that really work it day to day, call it the modern urban terrorism.

Consider this for a minute, Glenn -- if you look at a Wikipedia and they`ll tell you that there were 15,000 -- 15,000 gang-related murders across the United States last year. In southern California every year we have 500 to 1,000 gang-related murders in southern California.

Now, compare that to how many American boys are dying in Iraq and it pales in comparison. So, yes, we have terrorism in the United States, and the worst of it is being perpetuated by street gangs. And the Mexican Mafia is calling a lot of the shots for those street gangs in southern California, and they`re reaching their influence across the United States as we speak here today.

BECK: Rene, there`s a lot of people that don`t understand what`s happening on our border. It is -- it is completely out of control. The Mexican government, much of it is in bed with this kind of stuff even though some of them are trying to fight.

We can`t figure out why the border isn`t closed. Do you think that there`s a possibility at all, if it`s reasonable to assume that the same kind of heavy power and money that influences so many officials in Mexico is beginning to influence any of our officials here?

ENRIQUEZ: Well, I believe what you`re seeing now is a horizontal integration of a prison gangs and organizations, and these Hispanic gang subculture and integration of the street terrorism. Some of the influences of Mexican Mafia reach the California State Senate; even presidential -- past presidential candidate.

That`s detailed in the book, as well. To the scale that the Mexican government has been infiltrated by the corruption and the NARCO gangs, if you will. You see this with the cooperation of San Diego, and the utilization of San Diego gang members doing hits for the cartels over there.

They are exporting and importing hitters for the drug cartels.

What the normal average Joe, John Q. citizen sees is prison gangs and they have this stereotypical image of individuals with head bands, smoking Camel non-filtered cigarettes, speaking like (unintelligible). This is not the Mexican Mafia I was from. What you are really seeing now is a contemporary Murder Incorporated; a modern syndicate of organized crime.

Hang on, Chris, we`ll be right back with you. We have to take a quick break. We`ll be back in just a minute.

(COMMERCIAL BREAK)

BECK: We`re back again with the author, Chris Blatchford, and the subject of his book, "The Black Hand," Rene Enriquez, who joins us by phone.

You were going to say, when we went into the break, Chris?

BLATCHFORD: I was going to say, the Mexican drug cartels and the Colombian drug cartels are involved in an enterprise of billions and billions of dollars on an annual basis. They have incredible influence in Mexico, and Central America, and South America.

Why would they not want to have that kind of influence here? Why would they not want to use that -- that large amount of money to influence politicians in the United States and in particular Southern California where the drugs come across the border?

Sure, it`s going to happen. And if we`re not vigilant about it, it`s going to get worse and worse and worse. And we could have what they have in Mexico. Maybe not to that degree, but certainly with that same thought in mind.

ENRIQUEZ: I think when the organization started opting to retaliate on family members. There was another series of murders that occurred called the Maxon road murders where some children were killed. This was horrific, even no the most devious of Mexican Mafia members.

For me, the organization took a turn for the worst about ten years into it. You know, at that point, I wanted to leave the organization. I just became tired of all of the deceit and betrayal.

BECK: And you are in some sort of prison. I know we can`t say where. But you are incarcerated.

ENRIQUEZ: I am incarcerated, yes, sir.

BECK: And you know, again, I can`t talk to Compean and Ramos for their safety sake. These are border patrol agents. You`re in a "Black Hand," a prison gang and your safety is enough to be on the phone with me.

ENRIQUEZ: I am a former member of the organization.

BECK: Well, still, you`re clearly a guy marked for death by the "Black Hand."

ENRIQUEZ: I am in a protective custody environment, sir.

BECK: Okay. And, Chris, do you -- what should -- what should Rene get out of this by helping? Do you think he should be -- get -- because he`s serving life sentence.

BLATCHFORD: Yes, I think, you know, and I said at the beginning of this project with Rene that I would never be an advocate for him for getting out of prison. That`s going to be between him and the FBI and the U.S. Attorney`s office and the God that he prays to every day. So as a journalist, I`m not going to be a crusader for that.

But I think Rene is a changed guy. And I think he has done a lot of good so far, and he`s going to do more good, helping to expose what we see as a cancer that`s spreading across the United States.